Total variable costs divided by contribution margin
Sales revenue minus total costs
The break-even point in sales dollars is calculated by dividing fixed costs by the contribution margin ratio.
Questions & Step-by-step Solutions
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Q
Q: What is the break-even point in sales dollars?
Solution: The break-even point in sales dollars is calculated by dividing fixed costs by the contribution margin ratio.
Steps: 3
Step 1: Identify your fixed costs. These are costs that do not change regardless of how much you sell, like rent and salaries.
Step 2: Calculate the contribution margin ratio. This is done by taking the selling price per unit, subtracting the variable cost per unit, and then dividing that number by the selling price per unit.
Step 3: Divide the fixed costs by the contribution margin ratio. This will give you the break-even point in sales dollars.
